Duty drawback refunds most duties on imported goods that are later exported or destroyed. This article explains the process from first entry to final refund. You will learn the required forms, timelines, and recordkeeping that support a compliant claim.

We cover CBP Form 7501 for entry, Form 7553 for export or destruction notice, and electronic filing in ACE through ABI. Expect guidance on documentation, audit readiness, and options to self-file or use a broker.

We also outline eligibility across importers, exporters, manufacturers, and other partners, plus time limits, supervision rules, and common limits for Canada and Mexico.

Understanding The Duty Drawback Process

The duty drawback process follows a logical sequence that becomes much easier to direct once you understand it. Here’s a breakdown of the steps you’ll need to follow to recover your import duties.

Step 1: Import And Pay Duties

Your journey starts with an import transaction. You must keep detailed records during this original phase, starting with CBP Form 7501 (Entry Summary) and all related customs documentation. These records serve as your foundation to claim any future refunds.

After paying duties on your imported goods, think over whether these items might be exported or destroyed later. If that’s likely, start organizing your documentation systematically to prepare for a potential drawback claim.

Good record-keeping from the start will save you many headaches later. Your claim will face rejection without proper import records, whatever its validity might be.

Step 2: Export Or Destroy Goods

You must notify Customs and Border Protection (CBP) before you export or destroy the imported merchandise. File CBP Form 7553 (Notice of Intent to Export, Destroy, or Return Merchandise for Purposes of Drawback).

Timing matters tremendously here:

• For exports: Submit Form 7553 at least 5 working days before exportation
• For destruction: Submit Form 7553 at least 7 working days prior

CBP will respond within 4 working days to indicate whether they’ll witness the export/destruction or waive this requirement. Your action is considered “under CBP supervision” if you’ve filed the notice properly, even without CBP attendance.

Destruction cases need evidence from a disinterested third party (like a landfill operator) to confirm that the destruction happened. The evidence should prove that no articles of commercial value remained afterward.

Step 3: File A Claim With Documentation

The actual drawback claim comes after export or destruction is complete. All claims must be filed electronically through the Automated Broker Interface (ABI) in CBP’s Automated Commercial Environment (ACE). CBP stopped accepting paper claims in February 2019.

You have three options for electronic filing:

1. Self-file (purchasing software and establishing communication links with CBP)
2. Hire a licensed customs broker
3. Use a service provider who transmits claims you construct

Your claim needs detailed documentation:

• Commercial invoices
• Bills of lading or air waybills
• Manufacturing records (for manufacturing drawback)
• Evidence of duties paid
• Proof of export or destruction

You have five years from the date of importation to file your claim. Many businesses use duty drawback automation solutions to make this documentation-heavy process easier.

Step 4: Customs Review And Refund

A CBP drawback specialist reviews your claim for accuracy and compliance after submission. Be ready to answer follow-up questions or provide more documentation if asked.

CBP will issue a refund of up to 99% of the duties, taxes, and fees paid upon approval. Standard refunds might take several months, sometimes up to two years.

You could apply for Accelerated Payment Privilege for faster processing, which requires a valid drawback bond with CBP. This option could get you payment within about 90 days, sometimes as quickly as three weeks after acceptance.

It’s worth mentioning that CBP will bill you for the difference if accelerated payment exceeds the final liquidation amount. Accuracy in your original filing remains vital.

Keep all records for at least three years from the date of the drawback claim liquidation. CBP might need additional information or documentation.

Who Qualifies For The Duty Drawback?

Businesses miss out on money they could claim through duty drawback. This program reaches far more companies than most realize. The supply chain offers numerous opportunities to qualify.

Importers And Exporters

Duty drawback claims mainly come from importers who pay duties on goods they later export. These companies can easily get refunds since they have records of both transactions. To name just one example, see an apparel importer who brings fabric from overseas and exports unsold clothing – they can get big refunds.

Most people don’t know that exporters can qualify even without being the original importers. Companies buying imported goods in the U.S. and exporting them later can claim drawback rights. This creates money-saving chances at several points in distribution.

U.S. businesses have plenty of time to act. They can claim duty drawback up to five years after importing goods. This long window helps companies recover a lot of past expenses.

Third-Party Supply Chain Participants

The program benefits more than just direct importers and exporters.

Here are other supply chain players who can qualify:

• U.S. Manufacturers see big benefits from the drawback when they use imported materials in products they export. This helps companies in the automotive, pharmaceutical, and electronics industries.
• Intermediate Consignees can qualify in complex deals with multiple parties. These often need coordination and non-disclosure agreements to protect sensitive information.
• Destroyers of Merchandise can claim drawback on imported goods they destroy due to damage, expiration, or obsolescence, as long as CBP supervises the destruction.

Third-party drawback creates opportunities that many overlook.

Rights transfer between parties offers flexible options:

1. Customers who export can transfer drawback rights back to importing vendors
2. Vendors can transfer rights to customers who then export the merchandise

These transfers need specific records showing the transaction and identifying merchandise with potential drawback rights. Companies using duty drawback automation solutions find it easier to handle this documentation.

Eligibility Based On Export Or Destruction

Qualification depends on what happens to imported goods after entry.

Duty drawback applies when:

1. Imported goods don’t reach end users in the importing country
2. Goods leave the U.S. without being used
3. Companies return or destroy defective merchandise

Destroying goods requires submitting CBP Form 7553 to Customs seven working days before destruction. CBP returns the form with their decision about examination or waiver.

Companies must upload this form with the drawback claim and proof of destruction.

Exports need similar advance notice – at least five working days before shipping. Companies can skip this step if they have a one-time waiver or waiver of prior notice privileges.

Some products face limits. Exports to Canada or Mexico don’t usually qualify for duty drawback under substitution rules. This matters for businesses shipping mainly to these countries.

Good documentation makes qualifying much easier. While duty drawback might seem complex at first, the right services make recovering duties simple.

Here’s a real example: You buy imported products from a U.S. vendor and export them later.

You can work with your vendor to set up a drawback claim agreement – even without importing directly. This flexibility makes the program work for businesses of all sizes throughout the supply chain.

Final Words:

Successful drawback claims start with precise records and timely notice. Log imports with complete entries, then file Form 7553 before export or destruction.

Submit claims electronically with proof of duties paid, movement of goods, and any manufacturing links. CBP may ask questions, so keep files organized. Accelerated payment is possible with a bond, though final liquidation can adjust refunds.

Rights can transfer between parties with proper documentation. Keep records for at least three years after liquidation.

Remember that some substitution claims to Canada or Mexico are limited. Follow these steps, and the drawback can return meaningful cash to the business.